Investing in wine

3.08.2022
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инвестирование в вино

Investing in wine is probably one of the most unusual and interesting types of passive income, and collections of expensive wines have never been deprived of the attention of wealthy investors. But in addition to its demand and popularity, this type of investment requires not a small awareness of the investor in the trends of the wine market, otherwise, there is a high probability of empty and wasted investment. But if the investment is made wisely and thoughtfully, then taking into account the wine price increase (and this, by the way, is no less than 20%), then in a couple of years, you can increase your investment well. As the statistical results of research on the dynamics of investment markets show, the profit from investments in wine is much higher than investments in precious metals or even in oil.

How to invest in wine-methods

In Ukraine, the wine investment market is not very developed. The main reason is the ban on selling alcohol without a license. That is why there is no secondary turnover of alcoholic beverages in our country.

Residents of Ukraine who decide to invest their money in this product can buy, store and sell alcohol abroad. Currently, the most common methods are:

  • mutual funds,
  • purchase of futures,
  • auctions,
  • exchanges.

Mutual funds are organizations where investors can invest their capital in wine. The fund makes an assumption about which alcoholic drink will bring the greatest profit. The costs that are required for the storage and further resale of wine are fully borne by the fund.

Buying futures means entering into a contract directly with the producer. In this case, the buyer and seller agree on the purchase of wine in the future. The client must immediately pay a deposit, which was agreed in advance with the manufacturer, but he will receive the wine after two years. It’s worth noting that you won’t be able to predict how much a bottle of this alcoholic beverage will cost by the time it’s delivered. In most cases, manufacturers prefer to work not directly with their customers, but through special organizations or a merchant. A person of this profession can agree in advance with the winemakers. He buys new wine, and after a certain period of time sells it to wholesale and retail consumers. If the investor purchased the product from a producer or intermediary, then they will have to sell the wine themselves. The wine must be ripe, for this it is kept in a chateau, then it can be stored in a warehouse or in a cellar. If you have no place to leave your purchased products, then discuss this point with the merchant.

investing in wine

If you want to participate in a wine auction, then find a reliable platform. It should be noted that you don’t have to attend such events yourself.You can send your own representative. Large auctions are also held online. There are various auction agencies in Ukraine, where you can get advice about participating in an auction or find a representative who has extensive experience in this business.

You can also buy a valuable alcoholic drink on online platforms, which are also called exchanges. A wine broker interacts with site visitors. You can buy the product online, as well as use wine storage and resale services.

You should choose the type of investment based on how deep you want to dive into this topic. For example, in the first case, the investor practically does not participate in the process, the only thing he does is contribute his capital.

According to wine experts, it is better for novice investors to buy alcoholic beverages through a wine broker. It will help you complete your purchase and place it in storage. Transportation of purchased wine to the territory of Ukraine in order to resell it in the future does not make any sense. Because in any case, for further implementation of the project, you will have to take care of obtaining a license. This method of investing is suitable only for those people who have their own wine cellar.

Auctions provide everyone with the opportunity to purchase wine even before it matures. With the arrival of spring, wine specialists try products that came from the harvest collected last fall. This wine has a short aging period, it is young, it is interesting to try, but it is not suitable for sale yet.

Not only critics, but also journalists, employees of trading companies, buyers and brokers come to taste the resulting alcoholic drink. After receiving the results, the wine industry experts put up a rating, and then the purchase of products begins. Despite the fact that the wine will be stored by the producer for about two more years, those who wish can leave requests or immediately purchase the required number of bottles.

If you still want to transport wine products across the borders of Ukraine, then arrange for this event in the wine trading company, which will take care of customs clearance.

How much is better to invest in wine?

how to invest in wine

If you want to work through mutual funds, then the size of your savings should be at least 10 thousand dollars. This is the minimum entry threshold. However, there are also organizations where the lower limit is 25 thousand euros.

Investors who are going to buy and sell wine on their own at auctions or exchanges will need an amount starting from 100 euros. In most cases, wine is sold not in one bottle, but in boxes or cases. They can fit either 6 or 12 bottles. The only exceptions are old or rare wines. To purchase one such position, the investor needs to get an amount of 1000 euros.

What does the price of wine depend on?

It is important to know that the price of a bottle of wine often depends on three fundamental factors:: this is the grape variety, the country in which these grapes were grown, and the year of harvest — in the professional language of sommelier “illenism”. For those new to wine investing, various wine ratings, such as Wine Spectator and Wine Advocate, will help you choose the right investment object. Using information from these sources, you can make a profit of at least 20-30% of your investment, as these publications affect the popularity of certain brands of wine. Such demand will lead to higher prices. It is in such ratings that young wines that are still in barrels are evaluated. At this stage, it is considered best to buy wine for the prospect of generating income. But the investor needs to know how to properly store the purchased wine. Otherwise, if the conditions for saving wine and observing all the features of its “cultivation” are not met, then the investor’s expectations about the price increase will be in vain — the price of wine will only fall until it is completely devalued due to its own unsuitability. Improper storage is the main risk for investors.

As for the benefits, it is most profitable, according to experienced wine investors, to invest in large quantities of wines. This will allow you to get a proportional income over time. When the choice of wine for the deposit is made, you can start thinking about the formation of its own value at the time of resale. Here you need to spend a lot of time to study the cost of this wine in different years and track its dynamics.

Well, the most important rule is that a bottle of not very good and high-quality wine of a well-known brand will always cost much more than a bottle of excellent wine, but not a popular or well-known brand.

What are the possible returns and risks in this industry?

What does the price of wine depend on?

Often, you will be able to get a profit from investing in this alcoholic drink in four to five years. The amount of income directly depends on the chosen method. Most investments in mutual funds pay for themselves and bring investors up to 25-30 percent per year. On average, the income varies from 10 to 25 percent per annum.

Contracts for the supply of wine are considered profitable, but rather risky method. You can make good money by reselling your products, but there is also a chance that you will not be able to earn anything. To begin with, you should understand that wine is a live commodity, and over time it can be evaluated in different ways.

The taste of the drink may also vary. It’s one thing to try a wine that isn’t ready yet, and quite another when it’s already ripe. It should also be taken into account that the future harvest may be better than the current one. In such cases, the price of the purchased wine may drop significantly. Thus, buying new wine, no one guarantees you that you will make a profit.

The cost of a bottle of this drink depends on various factors, including the quality of the crop and the quantity of products received. The less wine, the more expensive the product will cost.

The advantages of this financial instrument include a weak dependence on inflation. According to experts, any type of investment has possible risks. In the case of wine, even if you lose, you will still enjoy drinking it.

Investment in a winery

Acquiring a winery is not just an investment, but a real business. In this case, you will need to pay attention to it and understand the nuances of this activity.

It should be understood that, like any other agricultural product, this alcoholic drink depends on various factors, namely::

  • adverse weather conditions,
  • pests,
  • soil, etc.

These investments are classified as non-current assets. You can buy a ready-made business, or start from scratch. You need to find a vacant plot of land, choose a grape variety. Also, you should know that in the first few years, this culture just grows. These products are not suitable for making wine. In the fourth year, you can safely launch your own winery. Grapes need to be taken care of, so you will need a team of experienced and competent specialists. The production of good wine can bring its owner several million dollars in one year.

Evaluate your capabilities and capital, and only then start choosing the method of investing in wine.

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